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Coty to Get Key Licenses and Rentokil to Make Strategic Acquisitions


Jan. 18 2016, Updated 4:41 p.m. ET

Price movement of Coty

Coty (COTY) rose by 1.8% to close at $23.15 per share as of January 12, 2016. The price movement on a weekly, monthly, and year-to-date (or YTD) basis is -7.2%, -17.0%, and -9.7%, respectively.

Technically, the stock has broken support and is trading below all moving day averages. Currently, COTY is trading 10.2% below its 20-day moving average, 15.1% below its 50-day moving average, and 14.5% below its 200-day moving average.

The AdvisorShares TrimTabs Float Shrink (TTFS) invests 0.97% of its holdings in Coty. The ETF aims to outperform broad US equities. The actively managed, equal-weighted fund selects stocks based on trends in outstanding shares, firm leverage, and free cash flow.

The competitors of Coty (COTY) and their market caps are:

  • Walgreens Boots Alliance (WBA): $88.3 billion
  • The Estee Lauder Companies (EL): $31.1 billion
  • Ulta Salon, Cosmetics & Fragrance (ULTA): $11.8 billion
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Transfer of P&G fragrance licenses to Coty

Procter & Gamble will transfer ten fragrance licenses to Coty upon regulatory approval and completion of the merger transaction. The fragrance licenses include Hugo Boss, Gucci, Lacoste, Bruno Banani, Escada, Mexx, James Bond, Gabriela Sabatini, Stella McCartney, and Alexander McQueen.

The debt from the P&G Specialty Beauty Business will be adjusted downward to reflect the ten out of 12 available licenses.

Performance of Coty in recent fiscal 1Q16

Coty (COTY) reported fiscal 1Q16 net revenues of $1,112.3 million, a fall of 5.9% compared to net revenues of $1,182.3 million in fiscal 1Q15. Its non-GAAP net income and non-GAAP EPS (earnings per share) rose to $219.7 million and $0.59, respectively, in fiscal 1Q16, as compared to non-GAAP net income and non-GAAP EPS of $103.0 million and $0.28, respectively, in fiscal 1Q15.

Meanwhile, its cash and cash equivalents and inventories rose by 21.9% and 5.0%, respectively, in fiscal 1Q16 on a quarterly basis. Its debt-to-equity ratio rose to 5.8 in fiscal 1Q16 as compared to the debt-to-equity ratio of 5.0 in fiscal 4Q15.

Rentokil’s acquisitions in fiscal 4Q15

Rentokil has made the following growth quadrant acquisitions in fiscal 4Q15:

  • In North America, the company has acquired Oliver Exterminating, which provides entry into the Puerto Rico and the Dominican Republic markets. It has also acquired Remus Pest Control in Los Angeles to build density into local pest control operations. The combined returns of these companies were 21 million pounds in the year before the acquisition.
  • In Australia, the company acquired Knockout Pest Control, which operates across the metro area and further south into Wollongong. This company generated revenue of 1 million pounds in the year before the acquisition.
  • In New Zealand, the company acquired Fumacare Hygiene Services to achieve density and back office synergies. Fumacare Hygiene’s annualized return was 5 million pounds in the year before the acquisition.

Rentokil has made the following emerging quadrant acquisitions in fiscal 4Q15:

  • In Malaysia, the company has acquired Abadi Hygiene Services to provide high-quality pest control and hygiene services in the cities of Kuala Lumpur, Johor, and Penang. Abadi Hygiene generated revenue of 3 million pounds in the year before the acquisition.

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